Economic policy, 1918–1939

This chapter explains the economic policies adopted by the Eastern European countries in the 1920s and the 1930s, and deals with the Soviet experience. The League’s Council repeatedly called for normalizing international trade and commissioned several studies stressing the danger of autarkic policies in the Danubian region, but without effect. Foreign indebtedness limited monetary policy options and the loss of foreign reserves left the introduction of exchange controls as the only viable option for most Central, East and South-East European (CESEE) countries if they were to keep honouring their foreign debt. The concentration of foreign exchange transactions at the central bank as part of exchange control policy meant that countries that introduced exchange controls effectively prohibited foreign payments and made the government the mediator between domestic debtors and foreign creditors. The interwar years saw important economic policy changes in Eastern Europe. The most radical shift occurred in Russia after the October Revolution of 1917.